This is the third of a four-part article series

In the third part of this four-part article series, we explore two pivotal areas within the realm of payments that are poised to be steadfast priorities for corporate finance and treasury executives in 2024. 

1. Greater interoperability in payments and accelerated adoption of real-time payments

Payments are becoming the centrepiece of corporate treasury spurred by the growth in digital payments.

Growing competition, collaborations and partnerships among tech giants, traditional banks, corporations, fintechs, and payment service providers have also contributed to the shift towards digital payments. This is accelerating and transforming corporate digital payments, bringing about enhanced operational efficiency, reduced systemic risks, lower operational costs, and improved relationships with customers and suppliers.

According to payments giant Visa, “Digital payments have transformed the way we move money. But the explosion of networks and payment methods — from apps and wallets to blockchains, together with legacy infrastructure — has made for a splintered experience. But that is changing. With interoperability taking priority, we expect a more seamless future of global payments — one where moving money across services is as seamless as using one.”

Visa adds that “In 2024, we will continue to see collaboration across the payments ecosystem — amongst banks, FIs, merchants, technology providers/enablers and issuers — bringing us greater global financial inclusion, accessibility, cross-system compatibility and interoperability.”

Interoperability in cross-border payments is also critical for businesses and eliminates the inefficiencies of closed-loop payment systems. Thankfully, in the coming year, Visa sees an increased focus on open-loop systems that will allow interoperability across vendors, platforms, and borders, delivering a frictionless user experience.

Given that organizations across the world are actively laying the groundwork for instant, frictionless and interoperable international transactions to unlock new digital opportunities for financial institutions, corporations, small and medium-sized enterprises (SMEs) and consumers, a new era in cross-border payments is coming that will likely transcend borders and help foster its rapid growth.

The evolving global payments ecosystem is also pivoting towards real-time payments (RTPs), driven by advanced use cases for consumers and businesses, steering “Global RTP volumes to record highs, with 195 billion RTP transactions recorded globally in 2022 — a YoY growth of 63.2%”, according to the 2023 Prime Time for Real-Time report, published by ACI Worldwide in partnership with GlobalData.

The report also projects that 511.7 billion real-time transactions will occur globally by 2027, representing a 2022-2027 compound annual growth rate (CAGR) of 21.3%. RTPs are expected to account for 27.8% of all electronic payments worldwide by 2027.

India is the undisputed real-time payments leader responsible for 46% of global RTP transactions in 2022— followed by Brazil, China, Thailand and South Korea, the ACI report noted. However, several of the world's major economies are lagging behind in the adoption of real-time payments. This includes the US, the UK, Canada, Germany, France, and Italy — all of which are among the top 10 global economies by GDP.

The launch of the US Federal Reserve’s (Fed) real-time payments service, FedNow, in July 2023, alongside The Clearing House’s (TCH) real-time payments system, RTP®, which has been live since November 2017, is likely to intensify competition, modernize the US payments system, and spur greater adoption of real-time payments in the world’s largest economy.

In fact, as per the 2023 Real-time Payments Survey Report by the Association for Financial Professionals® (AFP), sponsored by TCH, 98% of organizations in the United States with “Annual revenue between $1 billion and $9.9 billion anticipate they will have adopted real-time payments within the next five years to send payments.”

Moreover, the AFP survey estimates that by 2028, over three-fourths of US entities expect to use RTPs for both sending and receiving payment transactions.

Given that the primary benefits of real-time payments include faster means of payment, a reduction in transaction costs, enhanced operational efficiency, and improved cash flow and working capital management, the US recognized the advantage of adopting RTPs. The UK has also upgraded its existing instant payments rails. In the European Union (EU), the EU Commission has proposed a law mandating the use of instant payments or RTPs for all Euro transactions across its 27 member states, expected to be in effect from Q4 2024.

This bodes well for RTPs, as governments and regulators of the world’s major economies, recognize the diverse benefits are playing catch-up as widespread adoption of instant payments is expected to drive global real-time payments growth in 2024 and beyond. On the corporate side, this will improve the treasuries payments experience, and is likely to bring in more transparency to the otherwise fragmented business-to-business (B2B) payments landscape.

2. Fight payments fraud

Payments function as the backbone for our economies, facilitating the transfer of funds domestically and internationally, and supporting the development of digital economies.

The rapid growth in payments and payments innovation has also led to new opportunities to commit payment fraud. The advent and increased adoption of real-time payments may make domestic transactions and cross-border payments faster and more cost-effective than ever before, however, given that instant payments are immediate and irreversible, there will be less time to detect criminal activity or spot fraud. This makes RTPs more attractive to criminals and will likely result in a surge in payments fraud in 2024.

This possibility is further backed by the Aite-Novarica Group report (sponsored by Outseer), titled Faster Payments, Faster Fraud: Solutions to Stop the Madness, which states that “Faster payment rails provide a great deal of utility to consumers and businesses alike, but what appeals to customers is nearly irresistible to fraudsters.”

Furthermore, amid the escalating conflict in the Middle East, tense US-China trade relations, and the ongoing Russia-Ukraine war, there is a likelihood of a spike in cyber attacks this year, particularly AI-powered cyber attacks.

In their October 2023 update on geopolitical risks, the global BlackRock Geopolitical Risk Indicator (BGRI) sounded a note of caution, stating, “We see cyber attacks increasing in scope, scale and sophistication as geopolitical competition mounts. Hackers infiltrated the accounts of multiple U.S. officials this year, exposing the vulnerability of government infrastructure. We see cyber activity increasing in conflict zones and around upcoming elections, risking disruption. Technological advancements, especially in AI, could increase the risk of malicious attacks.”

“Although many corporations have dedicated cybersecurity teams, the threats for 2024 are extremely likely to include Artificial Intelligence (AI)-enabled cyberattacks. This is axiomatic for those in the profession, but corporations will need to alter their approach to cybersecurity because AI will allow even script kiddies to significantly advance their capabilities”, warns Insights Forward, a security intelligence service company.

Considering that AI enables threat actors to automate and amplify the sophistication and magnitude of their attacks, especially among cyber criminals who do not speak the same language as their targets, it becomes necessary to explore new and imaginative methods to outsmart AI-driven cyber threats.

While multinational corporations maintain dedicated cybersecurity teams, they must reconfigure their security vulnerabilities, implement additional layers of protection, strengthen their security intelligence, and give precedence to consistent employee security training.

Of particular importance is paying attention to ongoing and specific payment fraud training (securetreasury.com) for their employees, which is distinct from general cybersecurity training. This will help in preventing and combating payments fraud in 2024 and minimising the impact of such losses in a world of instant payments and geopolitical instability.

In conclusion, payments lie at the heart of global commerce and its digital economy, and the rapid development of payment technologies, greater interoperability in payments and increased adoption of RTPs will create new opportunities for players in the global payments ecosystem in 2024. However, these advancements will also offer new avenues for criminals to commit payment fraud.

Strengthening security control frameworks and points of vulnerability to handle the rising tide of payments fraud is crucial. Additionally, equipping employees with regular anti-payment fraud training will help corporate treasury, considered as the steward of financial risk management, significantly mitigate the escalating threat of payments fraud.

In this regard, continued reading of content published on CTMfile, along with listening to the OpenTreasury Podcast throughout 2024, will help corporations and their treasury teams make payments their competitive advantage and also offer value beyond payments.

To read the first part of this article series, click here: 

To read the second part of this article series, click here

To read the fourth part of this article series, click here